In a historic move, the Biden administration is tapping into the Strategic Petroleum Reserve (SPR) to bring an additional 50 million barrels of crude oil into the market. This is the largest-ever release of oil from reserves that comes shortly ahead of the Thanksgiving holiday in the U.S., ABC News reported.
Created in the 1970s, the SPR consists of underground salt caverns that are used to store oil in a safe and cost-effective manner. Typically, a cavern has a diameter of 200 feet (60 m) and a depth of 2,500 feet (762 m) and can hold up to 10 million barrels of oil. There are four major such oil sites in the U.S., all near the Gulf of Mexico. Together, their storage capacity is 714 million barrels of crude oil, and according to the recently compiled figures, the current holding stands at 604 million barrels.
This is not the first time that the U.S. has released crude oil from its reserves. However, most withdrawals have happened to address supply disruptions following a hurricane or delays in shipments. The situation is different this time, reports NPR. Demand for oil went down as people stopped traveling during the COVID-19 pandemic, however, as people are returning to normal life, the supply of oil hasn't resurged to meet the demand.
The average price for a gallon of gasoline, refined from crude oil, has soared 50 percent in the U.S. in the past year from $2.1 to $3.4, severely pinching pockets of middle-class citizens. However, the impact of the decision will not be seen overnight, since released oil typically takes 13 days to reach the market, according to the Department of Energy's Fossil Energy and Carbon Management office.
President Biden has also asked the Federal Trade Commission to look into any wrongdoings from the players in the oil and gas industry that might be keeping gas prices higher in the country, ABC News reports.
Additionally, the U.S. has also asked oil-producing countries to increase the production of crude oil, but the countries have been unwilling to do so as their own data suggests an oil surplus by the first quarter of 2022, Business Today reports. In a concerted effort, countries such as the U.K., China, Japan, India, and the Republic of Korea will all tap into their strategic reserves to increase the supply of crude oil and push prices downward.